Markets And Froth

Dear Friend

The markets are always odd. They’re never as ‘perfect’ as the textbooks might suggest and when wild human emotion becomes involved, really stupid extremes can arise – to the upside and the downside. What are the latest extremes of this? Coinbase (a crypto business) floating with a ‘value’ of $100billion? A financial advisory business (PensionBee) with a model which isn’t as dynamic and unique as they purport and ‘worth’ a mere few hundreds of millions despite making a £13million loss last year? 

Then Tesco’s results come along and the market’s not so happy and the shares drop a few percentage points? It’s a dull business model frankly but we are buyers of them for two reasons – the first that we believe they are undervalued and the second because we shan’t be buying either of the first two or anything like it, so we are not exposed to the extremes. The ‘crash’ when it comes, will be as selective as it was in the Dotcom bubble burst. Just think about it. These overblown stocks have been primarily chased higher by fair-weather investors and speculators who only think things go up. They will flood for the exit when things change (and who will be the buyers?). Owners of Tesco shares won’t. In fact, I suggest Tesco shares will rise as some of that hot money will seek good, old-fashioned value which pays an income – dividends from real profits (usual caveats of course…).

I am reminded too of the adage from Aldous Huxley. He said ‘that men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach us’. I am afraid many of today’s speculators have not learned that simple lesson. Maybe I should just add for all you tech and index aficionados out there… ‘Growth’ versus ‘Value’ peaked in October 2020. This was a many-year trend and the biggest valuation variation between the two themes since records began. The top ten ‘Growth’ companies count for 33.3% of the world index whereas the top ten ‘Value’ stocks count for a mere 11.78% of that index. Does that explain why we are not worried about a collapse in tech stock prices, especially as dull value is still so fundamentally cheap, owning assets and paying big dividends typically from trading in boring things with you and me every day? Might you understand why we have had the best ever performance year since the Firm was established in 1985 I wonder and a tremendous period since October 2020 too?

Spreads At Times Of Market Turmoil

I hadn’t seen it noted formally anywhere before but apparently the ‘spreads’ between buying and selling stocks in the height of the Pandemic were four times higher than they had been just two months before. It is ‘stating the obvious’ really but sellers especially need to know that not only are they selling at a bad time but the market maker, the institution taking your stock before selling it on again, is making four times the usual margin on the deal to cover the higher volatility. We did note this to clients who needed to access cash at the time – simply waiting, say till those spreads revert to normal lower levels – how many other advisers or financial institutions bothered to warn their investors that whatever market assets they were encashing anywhere would have suffered from lower valuations as a result? To us, it’s all part of the service – no extra charge applies and it all creates loads of work for us. (Sadly, too often, other advisers try to use market traumas as reason to earn a quick (and big) buck by encouraging the worried investor to take the money away (when ‘everyone’s been a loser short-term) and let them advise on ‘safer’ things – odd that isn’t it – rather than saying ‘best to stay put even if we suggest a movement later on’. This is even more the case if the adviser is paid only if you do a transaction – bet they don’t advise you not to do a transaction with them, eh! (Remember too some of these guys charge up to 6% subscription fee – yes, an immoral 6% versus ours at 0%).

Big Firms

I have said it before – there are big problems with using big firms to manage your money, compared to dynamic smaller ones. The bigger you become, the harder it is to do anything other than buying the same stuff that everyone else buys and you have to ignore the great opportunities which exist as you would struggle to buy enough and then would struggle to sell when it is time to move-on. Head of Barclays Wealth has at last been honest about this and has noted that they cannot and will not use Investment Trusts for example, an investment format which we support significantly because of the better opportunities they present so often, the ‘closed-end’ nature of the funds and the benefits this gives the managers to be longer-term, the ability to gear-up and the often lower costs. (Crucially, this freedom benefits our clients! How much? The odd percent each and every year if not much more and investors worry excessively about what charges they are paying?).

Barclays Wealth manages £15billion in active funds but it is yet another reason why more and more managers and advisers are pushing their clients into ‘index trackers’ (passives) and disengaged funds. The man says that excluding whole rafts of great investments ‘is in their clients’ best interests’. Sorry but this investment manager and all his pleased, long-term clients have to disagree – with the results to prove it.

However you look at this, it’s a poor show (even before considering the valuation bubble in the same ‘stuff’ so that at some point a collapse will arise, as they all clamour for the door at the very same time as all the rest of them). Managing our clients’ underlying investments takes time and effort and yes, often we have to deal in particular ways to optimise the value and keep costs as low as possible for clients but that is part of our job, we do that well and it is hard work often too. Even with new money, we don’t simply throw it at the markets that day either for example, as all the rest do – we are careful as to what we buy and when and the same when it comes to exit, according to the client’s need.

Good News

I’ve shared how well our Defensive assets have performed these last few years, also because we have been buying quoted ‘loan funds’ at deep discounts to the value of the secure loans on the books. These were all so popular several years ago but have not been ‘trendy’ for some time. Yes, not all of them will come good but too often, investors flee from them when there is a whiff of prospective or real trouble or even when the company announces it is going to close-down and repay investors, more investors sell-out rather than hold the course and wait a few years for the final payments to materialise. Some more good news today – one fund announced that its asset value has been written-up again and that loans have been repaid earlier than expected so it will repay a quarter of investors’ money next month, so the share price rises by 15% – thank you very much! This capital level is extra to the 8% interest we receive annually from the loans. This is on top of another fund in our stable repaying a special 5.5p this week too.

Yes, it is irritating having to wait with stocks removed from the market as the process continues and the company’s administration process winds-down but we and our clients have done handsomely by buying other investors’ impatience! (Sadly, sometimes we can’t buy enough of what we want though, as the Fund becomes smaller and smaller in size).


Has your bank lost its way? I am afraid that the more stories I hear and the more evidence I see, the more I am convinced that more banks than ever are losing the plot. I don’t know why it is happening but they seem to have developed departments of ‘anti-doing-business’ where logic and common sense are exchanged for ‘the answer‘s ‘no’, what’s the question?’ Of course, if you are a big steel magnate, they seem to say yes first…

I have used several banks over the years and some for decades and for a variety of purposes, including borrowing where I prefer to finance projects rather than tying-up all my own funds as well – it’s a goodly mixture which has worked sensibly, well and profitably for them too. The stupid thing is that effectively the risk was non-existent too – I am borrowing my own money back and paying them for the privilege effectively.

However, sad to say that one of the banks I have used for the longest time, Royal Bank of Scotland (now NatWest of course) has really gone-off the rails. We have had significant facilities with it for decades yet over the last few years the service and offerings have deteriorated significantly and the latest entertainment is a loan (needed for the length of the project (of course), which is continuing and with monthly repayments calculated on a twenty-five year term but with one of the new-fangled ‘five year reviews’ set at inception (the cynic would say simply as an excuse to charge a new Arrangement Fee on renewal and they would say for their ‘capital allocation purposes’) so that first of all, at year five the Bank actually says ‘where’s our money?’ and then ‘we’ll postpone repayment for a new agreement for six months’ (but increasing the cost from 3.49% over Base to 4.69%) with nothing else changing. Yes, this is the same bank where we have many millions on deposit for clients – time to take them elsewhere, I think.

Then there is ‘service’ from the banks and excuses such as ‘retail versus commercial parts of the banks cover different elements’ (as if we customers want to know about that or need to know – that’s simply for them to manage the departments between themselves) – do they think it interests us how they meet the regulatory directives? Just provide the service for which we are paying!

It seems too that with the hassles so many customers face (with potentially excellent credit and backing) where the ability to make a sensible judgement on an application is replaced by millions or even billions lost to giant lending projects which blow-up in their faces…
What they also seem to forget is that we are shareholders in these banks but if the experience we are ‘enjoying’ is reflective of how they are now doing business then their futures are worrying, and other new bank entrants will take business from them hand-over-fist (if they are different – which waits to be seen) and the established ones will simply be left with the rubbish.

Tomorrow’s Performance – Not Yesterday’s

An interesting piece in the Financial Times’ ‘Asset Allocator’ space last week noted the phenomenal performance of one of the top sectors over the last twelve months. It said: “DFMs (Discretionary Fund Managers) have largely missed out on that run. As is often the case, the strategy’s surge in performance followed on from a period in which many holders sold out. That means there are very few who still include the offering in their model portfolio ranges, according to our fund selection database.” Excuse me but we were and are now even more overweight in ‘Smaller Companies’ in our portfolio ranges and have done handsomely as a consequence. As I keep saying – it is tomorrow and not yesterday which is the most important to our clients and that is the position upon which we are concentrating always. Yes, it may mean we have to be more patient than we’d like and often have uncomfortable times too, but we have to match the courage of our convictions with a wise and very diversified range of overall components. We aren’t selling our smaller company exposures universally yet (yes, we may trim, simply to preserve overall risk mitigation) as there is more to come but at some point, when the prices are too high and the ducks are quacking loudly, we’ll let them have some or all of our stock as we’ll be buying the next thing which is cheap (and out of favour) at that time.

Thanks Again

Just again our humble thanks for the appreciation shared for these eshots… thank you JA for your kind words too! I know – I write too much but…thank you!


The concept of ‘ethical investing’ is gathering momentum. Unfortunately, more and more ‘funds’ are ‘greenwashing’ with lip-service simply for financial reward for themselves – it’s easy to sell nice-sounding things isn’t it, to unsuspecting, well-intended people who sadly are naïve too. I have just attended a Zoom conference and was reminded that if we all stopped using fossil fuels today, humankind as we know it would cease to exist. We shall be continuing to rely on fossil fuels for the next two decades at least and the greenest of us has to face that fact – change is a gradual process – not an overnight phenomenon! I have actually decided to sell a generalist Trust we have had for years and which has done well – why? Because it has put ‘ESG’ right up its list of priority considerations and trumping others – like investing common sense. Its parent company halved the dividend recently and unnecessarily. I challenged it by saying that was the most unethical thing it could have done – no reply… We invest for the future. The future will be far superior on environmental grounds, social considerations and governance issues. If we – and others – relegate anything to the ‘wholly unpalatable’ camp as it seems fluffily nice to do so, then the businesses will continue and they will operate in hidden structures away from the markets and will explode in the less savoury parts of the economic world, which doesn’t care. Is that really a good outcome? Do these people not realise that all quoted companies have to show policies that they have adopted formally in the fields of environment, social and governance issues and isn’t it better if sensible investors monitor, check and then hold companies to account in this regard, rather than treating them all as pariahs? Anyway, as I have noted previously, so many ‘pure’ ESG investments are at sky-high prices so who on earth would want to buy them now anyway at these totally unethical prices!

Christians Against Poverty

Two months ago, I attended the Zoom course from the local CAP. It’s not because I had financial problems or needed financial advice and guidance but I wanted to understand what the programme was all about and what I could learn from it, to share with those who are struggling with their finances – whether the very poor or simply those who struggle to manage their money and expenses. To find out more, watch this short video:

If you would like to join the North Devon course, email Ben on: How do you manage your monthly budget? The course is non-confrontational, non-judgemental and you will find it helpful if you struggle and find that there’s too often more month left than there is money!

Risk Warning
Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.

To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!

If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website We celebrate our 35th anniversary in 2020 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.

Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.

My best wishes

Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers